On second thought, @Loedn has a quite balanced proposal and I like it in theory. The major problem with prospective funding is assessing risk:
- There is great uncertainty of risk in proactive funding in comparison to traditional vetting processes. The counterparty, its capabilities and aspirations are difficult to measure at a distance. @fisherman.algo has a point in stating that assessing those risks adequately might be a fools game.
- A fluid council will vary widely in effectively assessing proposals. One would typically prefer to lock-in motivated experts providing support in their given fields to counteract uncertainty. Applying a rapid rotation of three months could conflict with the complexity of the task. One might favor a more meritocratic approach.
- A proactive approach requires a lot more upfront effort und cost to tame uncertainty. One of the main reasons proactive funding results has been lacking is likely that it requires a more restrictive, strategic framework under which decisions can be made. Proactive incentives on blockchain have difficult to manage counterparty risk when not streamlined. When looking at Optimism, missions and such are categorised under an umbrella of strategic goals set for the ecosystem, effectively providing a framework easing uncertainty and providing direction.
Marrying proactive and retroactive approaches under one framework might over time result in growing accidental complexity in these processes, draining disproportional time and effort, marginalising its efforts and probably resulting in overwhelming, probably conflicting monolithic structures that might make it difficult or even discourage people from contribution. Retroactive Funding, because of its reactive nature, doesn’t need as much rail guards as proactive funding. Proactive funding, in my opinion, needs an effective framework that is streamlining processes as much as possible. It requires much more upfront effort to mitigate risk.
A retroactive approach would put the risk on the participants and there is good reason to favour this approach at his time.
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Algroand itself is infrastructure that should inherently offer a value proposition based on its tech. Entities building on Algorand should be enticed to do so because the infrastructure offers competitive advantages for their businesses. It is difficult to see value in projects that are effectively disconnected from the real world economy. At the end of the day businesses need to generate cash flow based on tangible goods and services and can not rely on fluffy digital trends and promises that can only be sustained by speculative narratives living inside their own echo-chamber, driven by venture capital that is, honestly, mostly not interested in long-term positions but short term gains by exploiting said narratives. As we have painfully experienced over the years.
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Incentives should be focused on the major parts of the infrastructure that are critical to its operation and provide a strong foundation to build upon, to me these are to date: Network security and decentralisation (node incentives) and critical tooling like wallets, explorers etc. We are very reliant on few providers. If, for example, there happens to be a critical exploit on the Ledger HW, this would result in catastrophic effects for a signifiant portion of participants. With retroactive funds, projects that are important to Algorand, but not to date self-sufficient (or by its nature difficult to monetise but still important), like Algoexplorer and NFTexplorer, are able to operate under the goodwill they harnessed over time judged by their impact.
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The major contributor to a productive community is its culture. No matter what one might think about Bitcoin, its culture is strong and incentivices itself. Fostering culture is not merely a matter of one singular program and is likely impossible to precisely influence proactively. Retroactive funding supports the growth of culture just where it happens. The approach taken with AlgoKit, making it easy to engage with and contribute to Algorand, reducing friction and fostering action by means of usability and therefore inclusion, is likely the general proactive approach to take across the board. Fostering a strong culture ultimately fulfils promises that cannot be fulfilled by xgov alone. We probably should explore ways to further community engagement across the board.
Still, proactive funding is important and should not be dismissed entirely, but I would propose to compartmentalise its structure, based on the following naive assumptions:
Enthusiasts: People enthusiastic about Algorand, contributing by tooling or other means for the sake of community, learning and discovery, can be effectively supported by retroactive funds. These funds may snowball into long-term support for these tools/projects by continued funding of milestones. It is these people who demonstrated persistence who are most likely to develop valuable tools and projects over time, in comparison to startups acting merely on financial incentives with no particular convictions to Algorand or its community itself.
Businesses use Algorand because of its underlying characteristics, like TravelX, Quantoz, etc. Their reason to choose Algorand is because it provides them with competitive advantages. Strategic funding for businesses like Hesab Pay, offering significant impact and PR opportunities, is essential.
Institutions are interested in a CP systems that are secure, persistent, and have excellent finality.
Retroactive Public Goods Funding Program
We could marry the proposals by @Loedn and @fisherman.algo by simply removing the proactive part, concentrating on “I have done X, it has benefited the community because of Y metrics, I would like to receive Z”. Since proposers are known by having already contributed to the ecosystem, it minimises uncertainty and counterparty risk, while at the same time incentivising and fostering meaningful contributions. So, instead of randomly airdropping rewards for certain projects, enthusiasts who established themselves can apply for immediate funding for their milestones judged by their activity/impact/importance.
Stategic Proactive Funding Program
On the other Hand, I would welcome a separate proactive funds program on the condition that it is very much streamlined and focused on the most important categories we consider mandatory for Algroands strategic growth. Instead of receiving a magnitude of proposals from a diverse set of themes unfiltered (which are mostly handled by the retroactive program), we might discuss the themes and missions that are most important to us to achieve and create a program spanning multiple domains, offering funds by means of milestones to qualified, KYCd candidates in tight cooperation with the foundation. This would also streamline community engagement by effectively providing an overview of said categories, their importance and weight, their status and progress made, and foster continuous discussions about strategies, categories and projects over time. By categorising and streamlining our needs to select categories of importance, reached by discussion, and provided with extensive due diligence, we gain flexibility to adjust to critical conditions, improve overall assessment capabilities, and decrease uncertainty by handpicking the most promising applicants applying per category. In my mind, strategic proactive funding should be as regulated as possible, providing the same due diligence and safeguards as applied in traditional practices. It would allow the community to engage in tandem with an expert council to allocate funds based on precise evaluations and impact assumptions. Basically quality over quantity.
This might strike a balance worth considering.
